A scale-up is a business that has grown by at least 20% in either turnover or staff for three consecutive years. The 2017 Annual Scale-up Review form the Scale-up Institute identified 31,440 scale-ups in the UK (out of a total of 5.7 million businesses, 99% of which are SMEs) – so it’s a small and elite club.
But why is being a member of the club important?
The Scale-up Institute has quite rightly identified that nurturing scale-ups has the potential to make significant improvements to productivity, employment and GDP across the UK; public money and resources are being put into supporting the further growth of these businesses. Most support schemes provide funding and support for ambitious businesses at all levels, but it is true to say that there is a tendency to focus on those that already meet the definition of a scale-up and to nurture their further growth. In a similar way, private investment follows the same trend of reinforcing success and putting money into businesses that can show a strong track record of growth. In short, success breeds success and opens the door to investment and support opportunities.
Where do high-growth businesses need help and support?
The 2017 Scale-up Review identified five key gaps for scale-ups, where they need support to unlock further growth:
- Accessing wider markets;
- Accessing the right combinations of finance;
- Navigating infrastructure;
- Building their leadership capabilities;
- Finding employees to hire who have the skills they need.
The same issues apply to all ambitious businesses, whether they are identified as scale-ups or not. The first three points are focused on removing the principle external blockers to growth and addressing these is a clear requirement, but they are not sufficient on their own to drive growth without the last two. These are about making sure the business has the right strategy for growth and the ability to perform at the level to achieve the potential created by removing the external blockers. Without building leadership and skills (and developing the processes to exploit them) there is a risk opportunities will be missed.
So what is missing from this model?
A brief analysis of the various support organisations (public and private sector) offering support to high-growth businesses shows a strong bias towards finance and marketing, with some elements of specialist support such as HR, logistics and IT systems. These are the simplest areas to address – the “low-hanging fruit” – and those that can most easily be tackled by outside agencies without getting too deeply involved in the detail of the subject business. What is often missing is the close-in support that business leaders might need in developing the core strategy and processes to drive growth and underpin future success and sustainability.
Of the business leaders surveyed during the research for the 2017 Scale-up Review, over half said they perceived that there is no relevant support available to them. Some 42% of the respondents run scale-ups and 10% “aspiring” scale-ups (who have achieved 20% growth for one year), so the paucity of support is evident both within the scale-up club and outside it. Given the natural bias towards businesses who have been identified as scale-ups, the situation for those outside the club is even more difficult.
How can aspiring scale-ups break through the glass ceiling?
I would offer four thoughts to leaders running businesses with the potential and ambition for high growth and who want to break into the scale-up club:
- Set an identified goal in your strategy to reach a level of sustained growth you can define as “success”, whether this coincides with the recognised definition of a scale-up or some other measure that has value to the business leaders and owners. Make it challenging (your BHAG – Big Hairy Audacious Goal) – it will focus all other plans, targets and decisions.
- Perhaps the biggest step towards achieving this goal is in recognising the role that external help and support can play. Make sure all the bases are covered, including the more difficult areas of strategy and operations, and bring in people you trust – don’t go it alone.
- It’s all too easy to assume you need to hire in the new skills and techniques you need, but there is another way. By investing in your existing staff, building on the human capital you have already built up, and by improving your processes; you can drive business growth in a way that is both cost effective and sustainable.
- The scale-up club is a good one to be part of, but like all things worthwhile getting there is not always easy. The business leaders most likely to succeed are those who build a new support network around themselves and dig deep into the grit and determination that got them through the start-up challenges.